Managers of the Guinness Global Energy fund have warned of an oil price spike to $150 per barrel if Iran were to carry out its threat of closing the Strait of Hormuz and blocking 15% of global oil exports.
The price of Brent Crude jumped by roughly $5 today to an eight-month high of $111.65 per barrel as investors reacted nervously to the news.
The US and its allies are threatening to increase pressure to halt what they say may be a covert nuclear-weapons programme in the region, prompting speculation over Iran's reaction.
"We would be naive not to factor in the risks that military action in Iran would raise the price of oil," said co-manager Tom Nelson.
"The exports transported through the Strait of Hormuz are equivalent to two Saudi Arabia's or two Russia's, so the potential impact on the price is massive. We do not think this will happen but we cannot rule it out completely."
Nelson's outlook for 2012 does not factor in Iranian military action. His forecast for 2012 is that Brent Crude will reach an average price of $95 per barrel, while WTI will reach $85 per barrel.
The Guinness managers said weaker than expected global demand, increases in Libyan supply and action on behalf of OPEC to keep prices low, will all provide downward pressure on the price of crude.
Conversely, Angelos Damaskos, manager of the Junior Gold fund, sees the price of Brent Crude remaining at an average of above $110 per barrel in 2012, adding it could peak to $120 per barrel in volatile conditions.
"A spike to $120 could be prompted by further deterioration of political turmoil in Syria or a more aggressive stance in Iran," said Damaskos.
Damaskos' more bullish view on the price of crude has been prompted by his belief that demand for oil in developed nations is unlikely to drop below today's levels, sustaining the oil price.
But he acknowledged declining growth in emerging markets for energy, especially China, will provide some downward pressure on commodity prices.
The price of Brent Crude has steadily climbed from $95 per barrel in January 2011 to around $125 per barrel in May. It has now dropped back to around $111.24.
